Thank you for that kind introduction… I would like to thank the Association of Decentralised Energy and particularly my noble Lord, and the Association’s President, Lord Risby for inviting me to speak here today at his President’s Reception. I am even more pleased that I am still able to address you from this magnificent venue [the House of Lords], and we’ve not yet been decanted into a Portakabin or maybe a marquee on the lawn. But of course the upkeep of this venerable building is most important – we must make sure it remains fit for purpose and meets our needs in the twenty first century. And, naturally, this is a sentiment that applies not only to our building infrastructure, our energy infrastructure needs some serious work too; to make sure that it is fit for purpose as well.
But let’s not forget – we’ve come an awfully long way already. I’m reminded that the Association’s recent report “Invisible Energy – Hidden benefits of the demand side” made a very interesting point. If we used as much energy in the industrial and services sector per unit of GDP in 2012 as we did in 1980 business and public sector consumers would be spending an additional thirty seven billion pounds on their energy every year. That’s quite a stunning amount to reflect on. But to be fit for purpose in the twenty first century…to meet our renewable energy and carbon reduction targets…There’s a lot more that we can do and that we must do. So I’d like to take this opportunity to say a few words about the Government’s approach to our energy challenge. And how we are planning for a low carbon future.
My Department’s priorities are clear: reliable, sustainable, and affordable energy. Keeping the lights on and powering the economy… keeping bills low for families and businesses… And, importantly, getting a climate deal in Paris this year – a deal that works, and a deal that sticks. And when I say ‘Keeping the lights on’, that includes maintaining the security of all of our energy supplies. Oil for transport, gas for heating, diversifying into renewables and other low carbon sources of power …new innovative ways of providing decentralised energy, such as district heating or heat networks, and – underlying it all – reducing our demand for energy and becoming more resource-efficient. And of course heat is the single biggest reason we use energy in our society. Almost half of the final energy consumed in the UK is used as heat for domestic, commercial and industrial purposes. And if the UK is to play its part in the global effort to combat climate change, we will need our buildings to be virtually zero carbon by 2050. So, we need to change the way we generate, distribute and use heat in our buildings.
One development that I am particularly interested in is the increasing use of district heating, or heat networks, at a community, local and indeed town-sized scale. It’s vitally important that we meet our statutory carbon budgets in the most cost effective way possible…and that means tapping into the many advantages that heat networks have over more traditional heating systems, which serve individual buildings. Our view on decarbonising the energy system needs to be long term…and heat networks provide a unique opportunity to exploit large-scale low carbon heat sources, that otherwise cannot be used, as they become technically and commercially viable. I am excited by the potential for heat networks to use such a wide range of sources like recovered industrial heat, heat from canals or even the London Underground. In many places, I understand that district heating has been put in primarily to lower heating bills, with the carbon benefits a secondary consideration.
Keeping bills low and helping those that need it most is critical in the transition to a low carbon economy.
Communities and innovation
And heat networks can also be an important part of regenerating local communities. Over 100 Local Authorities and 180 projects across England and Wales have already been supported in this through the Heat Network Delivery Unit. If just half of these projects get built, that’s an investment opportunity of 800 million pounds. So the benefits of heat networks are clear. But is there even more to be gained from this form of heating? Last week I announced that there were nine winners from phase two of the Department of Energy and Climate Change’s heat networks demonstration programme. And I’m delighted that we’re supporting projects that will help further exploit the benefits of heat networks…including a heat pump project in the nearby London Borough of Islington, which will use waste heat from a large data centre as well as heat from the Regents Canal to supply heat to a local heat network…as well as a trial in Bristol that uses air source heat pumps matched to surplus energy from a solar photo voltaic system to charge a thermal storage array.
Energy security and Combined Heat and Power - CHP
It’s just these kinds of projects that will help drive innovation in the sector, improve system efficiency and integrate a wider range of low carbon heat sources. And as this project in Bristol looks to show the benefits of heat networks are not only in terms of the economy, the community and the environment. Heat networks can also help with our energy security. They can act as a type of “smart energy”… Helping to balance the grid, storing energy and shifting demand loads in ways which will be increasingly important as we change the overall mix of our power system. And, of course, combined heat and power systems have the potential to make a real impact on that mix. As many of you will know, Combined Heat and Power (CHP) is a well-established technology – both in the United Kingdom and internationally – and makes a substantial contribution to electricity generating capacity. And where there is a demand for both heat and electricity, Combined Heat and Power systems offer the most energy efficient use of fuel.
So I was particularly pleased to see that two large ‘Energy from Waste’ Combined Heat and Power projects were successful in the first Contracts for Difference allocation round. These will deliver secure, low carbon energy generation and help decarbonise industrial processes. And I was most impressed to hear about the work of Viridor, who are supporting today’s event. As a waste management company, they’ve move beyond the traditional approach to disposing of waste I understand that they now generate enough power for 330,000 homes in the United Kingdom, and are looking to increase the amount of heat they supply as well.
I am also pleased to see existing Combined Heat and Power well represented in successful bids to the first Capacity Market auction. With over four gigawatts of Combined Heat and Power securing capacity agreements, this represents more than eight per cent of successful capacity. But whilst the auction was a success in delivering flexible generating capacity and lower than expected costs to consumers, there was limited success for new build plant. So I look forward to seeing smaller providers being supported in preparing for the enduring Capacity Market…and a diverse mix of technologies participating in the Electricity Market. And I can also assure you that this Government recognises the potential role demand side response can play in helping to balance the grid, lower consumer bills and reduce electricity system costs and is fully committed to supporting the growth of demand side response through the Capacity Market.
But of course, it’s important that we don’t lose sight of what is at the heart of all of our thinking. The consumer. It’s important that when faced with these new energy solutions, the end user can invest in confidence. Confident that they’re going to have affordable, reliable and clean energy. Confident they’re going to be using a system that works. Confident that they’ve made the right choice. So I welcome the work that the Association has been doing in this area, including with the Chartered Institution of Building Services Engineers and other industry members…firstly in developing a Code of Practice and accreditation scheme for district heating…as this underlines the importance of setting a benchmark for minimum standards in the sector, so that system efficiency is optimised and heating bills are as low as possible…and secondly on setting up the United Kingdom’s first independent customer protection scheme for heat – the Heat Trust – to drive up levels of customer protection for heat users and provide a dispute resolution service.
And so I would like to thank the Association once more for inviting me to speak at their reception today, And for the work they are doing to advocate an integrated approach to delivering energy locally… Through Combined Heat and Power, through district heating and cooling, and through demand side energy services. And, following today’s announcement of the merger between the Association of Decentralised Energy and the United Kingdom Demand Response Association… I certainly welcome the country’s decentralised energy sector having a strong, coordinated voice. And I look forward to the Association continuing to work with the Department of Energy and Climate Change…as we progress towards our targets and achievement of our carbon reduction goals.